Soybeans are nearing the time of harvest in Ontario. In fact, there are few fields that have already been harvested throughout the province. I sure had a battle with my soybeans this year. Flooding rains in late May and June followed by consistently wet weather heavily damaged my crop. No matter how I tried to rationalize that things would get better, I don’t think they ever did. Now that the leaves are falling off the soybeans that damage is so much more acute.
It will make for a quicker harvest. Dunno if that type of humour will help me as my combine nears the field. Grain markets in September have reflected the emergence of a “flash drought” in the US farm belt. The biggest crop ever has sizzled a bit late into the season with soybeans taking the brunt of the yield hit. Hot dry condition always hurt soybeans in the critical pod-filling period of August/September. Soybeans went from $11/.83 on August 12th to $14.08 September 3rd. Corn and wheat have been brought up to some extent with soybeans.
As we move toward October, a key USDA report will come October 11th , which will serve as a flashpoint for violent futures market action. Acreage numbers, readjustments and crop size are all in the mix. The US crop is big but with conditions changing by how much?
Part of that answer was given on September 12th when the USDA released its latest crop report. The USDA actually lowered soybean yields down to 41.2 bushels per acre, which is a 1.4 bushel per acre drop below expectations. This puts US soybean production at 3.149 billion bushels down 3% from August. There was a bit of a surprise in the corn market as the USDA actually increased corn production estimates to 13.84 billion bushels with an average yield of 155 bushels per acre. It was pretty obvious from those numbers that the late-season drought in the United States has hurt soybeans much more than it hurt corn. The question is now will soybeans keep corn up or will corn drag the soybeans down.
Soybeans were up $.37 on the day as market bulls see all kinds of blue sky ahead. The corn/bean ratio popped up to 3 to 1 on the price action and may be expected to reach as high as 3.5 to 1 going into the winter. There is just too much corn out there with soft demand versus chronic low supplies of soybeans with more dynamic demand. That will obviously change someday but it might not be very pretty for corn prices getting there.
Corn in many ways is a victim of its own genetic success. Corn yields are increasing much faster than soybean yields and even in the good times of the last few years that has been part of the success. Sometimes I feel that we forget that in these profitable times. Carrying that in your back pocket is always a very good thing. It just so happens that maybe this year corn’s productivity gains are really showing up against their soybean cousin.
In Ontario the corn crop is shaping up to reflect that. There was one private agency come out last week predicting southern Ontario corn yields at approximately 160 bushels per acre. We need to avoid an early frost to get that but it is still represents a very healthy yield for the province. Take the 2.15 million acres of corn that was planted and it looks like will have over 330 million bushels of corn on the ground this fall.
Of course the only way to get rid of that corn at harvest time will be to lower price until we can export it into the United States. It just so happens that Ohio, Michigan and Indiana are having extremely good years for corn, which doesn’t bode well for corn basis situation moving ahead. I’m just saying.
Soybeans on the other hand have the wobbly Canadian dollar, which has helped those cash prices on top of those robust futures prices. The problem producers will have is how many soybeans are damaged like mine. How many have a little white mold in them. It will be difficult for Ontario soybean yield to push records this year.
In past times this might mean a prescription for hard times. However, this is 2013 and we still have extremely low interest rates giving the agricultural economy lots of lubrication. That means we will be able to weather lower revenues and come out the other side. USDA might have a few more surprises but maybe the Ontario crop will too. This is agriculture and it is all so normal.